i'm becky quick along with joe kernen. our top story is the global markets. the u.s. equity features. they are up by about 22 points. but this is coming after quite a bit of tumult. you had philadelphia fed president charles plasser saying the central bank's latest monetary stimulus will not do much to boost economic growth or lower unemployment. and it raises the risk of longer run inflation. people are focusing back on that again. that's why the dow yesterday and the s&p and the nasdaq, all the stocks across the board ended at their worst levels of the day. while we were sleeping, asian stocks also fell across the board. market watchers say that investors are turning their backs on that perceived positive effect. instead, they are focusing on europe's fiscal issues. we'll check in with our colleagues at cnbc asia to talk about what happened over there. you can see right now, down by

2% in france. in all of this is on continuing uncertainty about the eurozone debt crisis that. is a driving factor after people started ignoring it, at least for the last several weeks. spanish protests against new austerity measures turning violent. demonstrators clashing with police. protesters surrounding government buildings in madrid and calling for the disillusion of parliament. this comes just days before a new round of austerity measures are due to be announced in the 2013 budget that is due tomorrow. in greece today, a 24-hour nationwide strike is kicking off. europe is not the only region in the world that's dealing with tension. in japan, japanese auto makers are cutting back production that they have for their plants in china. this decision is coming in the wake of the anti-japan protests. they close dealerships.

anti-japanese sentiment in china escalated earlier this month after japan said that it would buy a group of disputed islands in the east china sea. protests across china, angry demonstrators vandalize properties of japanese companies. in the next hour, we'll be joined onset by two squawk masters who are ready to talk about all this chaos. neel kashkari and larry lindsey. let's get to the morning's other top stories. joe, i'll send it back to you. >> germany and its two closest allies in the eurozone appear to be stepping back from a key agreement over a bank bailout. german, dutch, and finnish finance ministers met in helsinki yesterday, and in a statement they said a plan to move bad bank assets off the books of struggling eurozone governments would not apply to legacy assets. this is said to be a reference to banks that were shored up and wound down under ireland's $82

billion bank bailout. i mentioned germany, i've mentioned finland, i've mentioned dutch and i've mentioned ireland. somehow it all comes together to where legally they don't want to cover some type of legacy. that shows part of the problem there. it also calls into question whether the program -- let's have one more -- would apply to spain's most troubled banks. meanwhile, spain's prime minist minister, apparently it's -- caruso cabrera is here to work on announcers. you should be here when andrew here is here. he's not in today. he's ready to seek a new rescue package for his troubled country, but only if spain's debt financing costs remain too high for too long. investors have been worried about madrid's apparent reluctance to seek a bailout. >> we checked on the global markets already. now let's take a look at the broader picture. again, the futures here in the

united states look a little better after what was a pretty lousy day yesterday. i think it was the worst day for dow in the entire month of december. it was the worst day for the nasdaq in two months and it was the worst day for the s&p in throe months. oil prices continued to push lower and they do once again this morning. they're down another 64 cents to $90 and change. that's been the one bright spot that's been helping out things like the transports, but again, yesterday, every single one of these sectors is down. yesterday we saw a dip below 1.7%. let's call up the dollar board right now. you'll see what happened with these. dollar is a little stronger against the euro, but that's not saying a whole lot. 1.2865. we're also taking a look at the yen. never mind, i lost it there. gold prices are barely budging, 17.66. >> plasser said something yesterday -- >> he said it's not going to help. >> he said he didn't agree with

it, it's not going to help and it's going to be hard to get out. >> right. raise the risks. >> just the idea that maybe it wasn't unanimous, would it cause traders to think wow, they might not leave this on as long as we thought? is that really why the market is up? >> there was no european stuff happening yesterday. everybody was attributeling it to that fed guy. >> we've heard it from how many people that have come on this show, guys that were in the room but didn't get the vote. >> but it was 100 points, after all. much more worried about what's happened in the transportation sector over the past couple of weeks. and now it's down for the year. i don't know if you still -- >> caterpillar.

>> it's below 9,000. it was a two-week closing low. in china, another thing. the chinese stock market has been telling us that it was going to be worse than a 7.5% soft landing. been telling us that six and a half is consensus. li is standing by in singapore with the full story. good morning. >> good morning, joe. asian forces are firmly in the red on concerns about europe's crisis and global growth. the shanghai composite ended just a tad above that psychological 2000 point level. this interesting comparison tells you greece outperformed

china. year to date, investors would have gained over 10% by investing in greece. instead, it's a 9% loss by investing in china due to growth concerns and political uncertainties. today the shanghai composite was dragged lower. the property sector was also lower. in hong kong, the hang seng also ended in the red. industrials dragged it down. many firms traded x dividend. auto makers also took the brand of selling on reports of china production cuts due to the backlash. meanwhile, shipbuilders and financials weighed on south korea's kospi. elsewhere, australia miners ended lower, but defensive headquarters capped loss on that market. india's index lowered by about .4 of a percent.

let's get over to london now and the latest out of europe. kelly evans is standing by with that. kelly, what can you tell us about some of the chaos there? >> becky, good morning. pretty much get a sense from looking behind me, it's great to see her, by the way, on your program. usually we just get to hang out on "worldwide exchange." you'd be hard pressed to find stocks in the green. there's a couple over there, but really not too many to mention. this is a pretty broad-based selloff. for the most part. we can take a look at the ftse 100. now greater than 1% on the morning. dax down 1.5%. cac shedding nearly 2% at this point. spain's ibex down 2.65%. this is where some of the real action has been. i almost don't need to do anything else but show you this

chip and that can give you a sense of what's happening in markets. we've seen concerns about the health of different regions of spain drawing on the sovereign's finances. that starts to raise the specter of what spain's credit worthiness is. we all know what it is at this point. in any case, italy is also moving up 5.25%. take a look here at what's happening, german seeing its lower yield for the day. this despite the fact that it had a technically uncovered auction when it was trying to top out the five billion offering and only was able to get 3.2 billion euros of it worth out the door, up ten basis points. does it reflect the health of people evaluating germany as a sovereign, that's going to be a big question to focus on today. euro dollar, though, you can look at the spanish ten-year, it tells you all you need to know. i realize i'm blocking it here. nymex 90.74 is the level.

we're not far from seeing this back in the 80s and that will flow through to the gas price, although perhaps given the consumer confidence report we saw yesterday, it's not necessarily going to be a game changer even if that does happen. back to you and back to this question, which is an interesting one. if you look, you've got the athens index up 10% over the past year. shanghai is down 9%. which do you buy now? >> right, you are right. we don't like all that red at this point. we actually have -- you didn't fly in. mcc is here, which is good for a lot of reasons. but first we're going to look at some of the violent pictures out of spain that we got from late yesterday. a nationwide strike in greece today. typically you get anything like this happening, you'd be over there, right? >> right, we discussed it. there was a 10:00 p.m. flight from jfk to madrid. >> so you did think about it. see, i'm right about this. you are michelle caruso cabrera. joining us now onset.

and you did not go. why? >> well, because we thought as the evening wore on that things had actually calmed down, so we weren't sure that we were going to see a lot more protests today. and we think there's going to be many more to come in spain. i will have plenty of time. >> what was the tipping point in the last couple of days? >> last night, late afternoon u.s. time last night in madrid, we did see violence erupt. there was a huge protest. we did expect it. the reason they were having the protest is tomorrow, so two days ahead for them. the new budget in spain for the year 2013. >> do you know where in madrid? >> neptune plaza. it's right naear the parliament. they moved to the port dela sol because they had to leave there by 9:30 madrid time in the evening. >> this is austerity measures. >> more cuts in salaries. not cuts in pensions, what we expect. we don't know what's going to be

in the budget, but we generally know what's coming. there are going to be higher taxes. now they're saying that pensions will no longer be linked to inflation. you're going to get a pension -- >> this is government pension? >> yeah. so that's the other weird thing about a lot of europe. yes, government pensions, but remember, 80% to 90% of the working population in greece, regardless of the they work in the private sector -- >> you mean greece or spain? >> i'm sorry, spain. are covered by union contracts. so even if you don't work for a union shop, there's a sector-wide contract that's in place that looks very similar to what the public sector workers were getting anyways so. the last time we saw big disruptions, everybody was really mad because they got rid of the christmas bonus. there they call it the christmas bonus. it's not the holiday bonus. it's a very catholic country. >> how big are these bonuses that they're talking about? >> if you normally got 12 months salary, you got a 13th month, a 14th month -- >> you could get three months?

>> you could get 15 paychecks a year. yeah. the christmas bonus, the easter bonus and maybe the summer bonus for holiday. >> so it's a material amount of money. >> oh, it's an absolutely material amount of money for them, absolutely. >> what do you do with your christmas and easter bonus last year? >> maybe it's time for us to make a little stink. >> so there's a general strike -- >> that's from vacation, remember? kidnapped the guy. kidnapped the boss. >> this is a live picture of athe athens. >> needed the money. >> michelle, spain, have they had protests. we see this in athens all the time. this is the second time we've seen violence in spain. the last time was several months ago with the christmas bonus being eliminated.

this is the second time now that we see violence. most of the protests are organized by the unions. this was mostly young people and it was in the evening. that's when we've also generally seen the nighttime protests are likely to be more violent than the daytime protests. the story is always the same, right? they raise taxes, they cut spending. they thought they were going to meet their deficit taxes, so now they have less tax revenues, so now they have to do it all over again. what i think is funny is that rajoy has said out loud i'm only going to look for a bailout if our interest rates go up. >> and interest rates have not gone up. >> draghi does him a big favor. so he says well, i'm going to wait and see until if i really need it. when you're running the country, you're not going to ask for a bailout until you start to be choked again by the bond market. >> 6%, is that the number? is it 7%? >> i've been told 8% for spain. and these countries really can

hold out for a long time. they just have to make very, very hard choices. if they seek a program which is esfs and draghi step in to start buying their debt thark can go on far very, very, very long time. greece is going along just doing tea bills every two weeks. >> what's strange is how europe goes away and the markets here forget about it for weeks at a time and then all of a sudden it's back on the play. >> i think that -- the reason it went away is draghi took cataclysmic events off the table. so they're not going to go into the abyss. what we see now is the basic bad numbers that say a really bad recession is coming. we could have all predicted that, but now we know what that means in terms of corporate profits, the ripple effect for the markets, etc. and we started to see numbers. so today, there's new numbers out of spain which show tax

revenue in the third quarter was far lower than they expected. so gdp is far worse than they expected. it starts to snow ball. that's what's happening now, coming to grips with their economy is going to be horrendous for a long time. >> thank you very much. i'm sure we'll check back with you later this morning. we have to go? really? we do? all right. coming up, this football stuff. >> we'll get into some of this. >> today's national weather forecast. in sports, another team clinches a major league baseball playoff spot. but pointless, really. going to lose to the reds one way or another. both president obama and mitt romney will be in ohio today. the story behind that swing state.

welcome back. take a look and you'll see that the dow futures are slightly higher. s&p futures up by close to two and a half. this comes after the market ended on its weakest levels of the day yesterday. yesterday was the worst day for the month of september for the dow. it was the worst day in two months for the nasdaq and it was the worst day in three months for the s&p 500. all of that kind of playing out overseas as well. in europe this morning, you are going to see some red arrows. a lot of concern about what's happening as protests pick up in spain, and you see more concerns coming in greece right now about austerity measures.

the german dax is down by about 1.5%. the nikkei in japan was down by 2%. in "sporting news," the atlanta braves are on their way to the postseason in. the boft the ninth against the marlins last night, freddy freeman connected and takes it to straight center for a walk-off homer. exciting. the braves win 4-3 and clinch a spot in the n.l. playoffs. the second postseason berth in the last seven seasons for the braves. should i make braves fans angry? do or don't? they got to the postseason like, i don't know, 80 times and won one world series. that's like in the '90s. so i'm not really worried about the braves. in terms of the reds. in golf news, the u.s. winning

the junior ryder cup for the third time. but we're more interested in whether we're going to hear that horrible european song that they sing when they're winning. things happening. tiger woods, brandt snedeker and others hit the course for a practice round yesterday. nine of the top ten in the world are competing. these euros, when they need to hit putts, there's just something about these guys in ryder cup. i've seen grown men cry -- well, yeah, i cry watching. calcavecchia. things happen in ryder cup. you remember hunter mahan. be bernhard langer. not just your country, the whole

region. and then you've got -- ahmadinejad wants to eliminate israel. he says it. he's going to say it at the u.n. on yom kippur. instead, we've got these refs. >> "the new york post" and the "new york daily news" did have ahmadinejad yesterday. >> it's in "the wall street journal." >> in the journal saying you've got to be kidding me. >> scott walker, the union buster from wisconsin is totally behind the union on this. like what are you doing? >> his green bay packers. >> it's weird, because what if something happens towards the end of the season where green bay is either in or out. and there's an asterisk on that game. there are is not like baseball where you have so many games that eventually one game doesn't matter. >> people's livelihoods depend on it. >> they fight every one like an absolute battle.

>> i do think it was weird to actually go to foot locker and recruit those guys to be the referees. that's where they got apparently some of these. have you been to foot locker? just said okay, you -- >> come on in. >> is college refereeing that bad? >> rules are different. the players always try and intimidate the officials a little bit. and boy, do they feel like they can go out -- >> scared me the other day. >> when he grabbed the ref at the end? >> he's going to get fined for that. roger is a great ceo of the whole deal. >> goodell? >> yeah. this is going to be -- >> this is a big deal. >> it is. >> we had talked to him back in august about this. he said oh, it's going to be just fine. >> the journal points out the referees make $150,000, they work six months and mostly weekends. and it's all about whether they get their pension plan turned

into a 401k. >> they want to be grandfathered. >> they want new referees to be 401k. >> in fairness, that is what happens at most companies. >> goodell's going to give them probably whatever they want, he has to give them now. >> they've got a little bit stronger bargaining position at the table. maybe they'll ask for more than that at this point. right now, let's get to today's national forecast. alex wallace is here, he joins us from the weather channel. >> good morning to you, tracking a few showers here moving across the northeast. it's fairly light at this time, moving across new england. there's another batch here into the mid-atlantic moving east of pittsburgh. there's also more activity moving across the midwest. we've seen some storms in louisville, back towards st. louis. looks like another batch is going to be moving its way on through. so we'll be in and out of storms across these areas here for day. it's all thanks to this front that's lining up. it's not going to move a whole lot, so we're going to watch the storm train ride along that

front. some of the storms could pack a little bit of a punch today. that red shaded area, including oklahoma city, back over towards louisville. could be looking at storms producing some damaging winds. heavy downpours as well. we can't rule out even a tornado. we saw one of those yesterday in illinois. the rainfall amounts, well, generally going to be in that one-inch range but there will be a few locations, southern plains and back into the ohio valley where we could see tw to foo to inches of rain. it's all thanks to this boundary. north of the boundary, keeping it cool. south of the boundary, that's where we are going to find some warmer numbers. talking upper 80 toss near 90. chicago, you'll be right around 67 degrees for the afternoon. heading on into thursday, more warmth from the carolinas back into the south. but north of our front, we'll keep things rather cool. guys, back to you. >> alex, thank you very much. trying to figure out exactly where that line goes through. i think it goes right through the middle of new jersey.

when we come back, we'll head to washington. president obama and mitt romney both storming ohio today. we have a live report from greece where nationwide strikes are under way. this action comes the day after violent protests erupted in spain. we have the story from europe when we come right back. [ male announcer ] for the dreamers... and those well grounded. for what's around this corner... and the next. there's cash flow options from pnc. solutions to help businesses like yours accelerate receivables, manage payments, and help ensure access to credit. because we know how important cash flow is to reaching your goals. pnc bank. for the achiever in you.

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good morning, and welcome back to sidewalk squawk here on cnbc. it is -- is it okay? >> no, please don't. >> it's almost 6:30 on the east coast. i'm joe kernen along with becky quick. our top story are the global markets. u.s. equity futures after a selloff yesterday are getting back about 17 points. while we were sleeping, asian stocks fell across the board. market watchers say investors are turning their backs on the perceived positive effects from central bank easing. instead, now they're focusing on europe's fiscal issues again. the major european boris is also seeing a lot of red this morning. again, the driving factors. and there's spanish protests against new austerity measures. demonstrators clashing with police. protesters surrounded government buildings and call eed for the

disillusion of parliament, the day before austerity measures are due to be announced in the 2013 budget. meantime, in greece, today, a 24-hour nationwide strike is kicking off. you notice that when that happens in greece? i guess. >> yes. >> how about a live report from athens in a minute. first let's talk talk u.s. politics. mitt romney and barack obama courting the buckeye state today. john harwood joins us from washington. another development. i think you have to admit. might put romney over the top. that is madonna says she's going to take all her clothes off if obama were to win. >> no way! >> yes. >> she's already done that. >> that's what becky said. what's new? i think that might put romney over the top, like no, no!

but you never know. >> she reinvents herself all the time. maybe she can reinvent herself as a 50-something pin-up. >> she tried to -- she said at a concert, you better support expletive obama, and then she called him a muslim or something. >> i saw some headline on twitter that said support the black muslim. >> yeah. the campaign is going stop, please! just don't -- just leave us out of this, please! anyway, ohio. who's in the north, who's in the south? that state is very different, cincinnati versus cleveland and columbus in the middle. where are the respective candidates? >> honestly, joe, i don't know. i do know that there is a new "new york times" cbs poll out that shows obama ten points ahead, which is higher than i have seen in other polls.

we have seen consistently that obama is leading. >> in ohio this is? >> have to find out a way to change the direction of this thing. >> this is in ohio or nationally? >> in ohio. >> okay. >> the average of polls lately has shown obama in the range of four to five points ahead in ohio. ohio is really critical to this race. no republican has ever been elected president without it. this is a place where president obama has really targeted to try to take it off the table for romney. but when you look at the combination of states that romney has got to put together to get to 270 elect roral votes romney is behind in all three of those right now. he's looking to the debates and he's looking to some intensive campaigning with paul ryan to tray to make a difference. >> john, i heard a report on npr this morning talking about gary johnson, the former governor of new mexico, who's going to be running -- i think he's on the ballot in something like 47

states. you don't hear much about his campaign. you don't expect that it would make a difference too many places, but in some polls he's picked up as much as 6% of the electorate. do either the democrats or the republicans really give this much thought? >> i think republicans are a little more concerned. remember, gary johnson was an elected republican governor, and when you look at that strong libertarian chunk of the electorate, that's more of a part of the republican coalition. on the bright side for romney, gary johnson's got as minimal attention as a third party candidate can get, not anywhere in the league of ross perot some cycles ago, not as much as ralph nader i don't think either in 2000. but he is getting some. there's concern that in a close state, he could take a point or two away from romney and that could make a difference. >> he's got some out there

ideas. he's talk about balancing the budget next year, which would mean cuts of over $1.4 trillion, cuts to social security of more than 43%. >> i think he wants to legalize marijuana also. >> he wants to legalize marijuana. he is in favor -- he's a pro-choice candidate. he wants to end the war on drugs. he wants to get rid of the federal reserve. he wants to get rid of the irs. >> right. and republicans thought they caught a break and sort of got on a better path with ron paul and rand paul in the sense that ron paul was not talking third quarter. rand paul is working within the republican coalition. and gary johnson, who got -- i think he was only in one or two debates, he's not cooperating with that playbook, and so he's running as libertarian nominee. and could make a difference. there is an infrastructure out there in a small but determined group of people who may make

some difficulty for the republican ticket. >> all right, john. thank you. we'll see you later or tomorrow or sometime. >> you will see me sometime. >> we will. good. i didn't talk to you about football. >> go nationals. >> the nationals have a better record than the reds. it's close. >> they do. but the nationals are kind of sliding right now. they've lost six or seven of their last ten. i'm a little bit -- they've clinched along with the braves, but they haven't clinched the division yet, and i'm not liking where the direction arrow is pointing right now. >> yeah. i finally watched "money ball" yesterday. >> hey, joe. you mentioned the bernhard langer in the ryder cup. do you know the story behind that putt? >> he hit a good putt. that's all i know. it was a heartbreaker for him and for the euros. what's the story? >> well, it was interesting,

there was a story on the "sports illustrated" website yesterday about the myth surrounding the lang langer putt and it is widely believed among pro golfers that he missed that putt at a moment when he had a child who was terminally ill and the story was langer said it's a complete fiction. like some other golfer in sympathy said that about him and he said he's got two kids and neither one of them have so much as a cold at the time. he just missed the putt. >> so people just -- yeah. i was just talking about how you remember hunter mahan. it's really -- you remember justin leonard and then the u.s. ran out and disrupted who was trying to putt. the ryder cup is big. and it never was, but now it is. is it nbc? >> it's gotten very big. >> i think it might be nbc. i hope it's nbc. if it's not -- yeah, it's nbc.

it's the best thing that's ever been on. if you don't watch this, you got to be a complete idiot if you don't watch every hour of the coverage of the ryder cup on nbc. the parent company of this network. and one of the finest companies in the universe. run by the finest people. hoffman. burke. am i leaving anyone out? brian. anyway -- we have time for that. no one's rushing me either. >> this is the first time they've been wrapping you all morning. >> bobby codic. >> he was pretty good. i believed what he was saying. and i met jonah, too. now we do have to go. in this sharka wall street. i met him and he was great. i like him in that other one,

"superbad." >> we'll talk about that off camera. let's get back to europe right now. the market has been paying a lot of attention to. after violent anti-austerity protests in spain yesterday and a 24-hour strike in greece today, julia chatterly joins us from athens. hi, julia. >> reporter: good morning, becky. the crowds continue to gather behind me, but the pictures not really giving a sense of the number of people involved. for the last couple hours, protesters have been marching past parliament. they do a big loop. the question today is whether they actually end up back here later. for that, we're just going to have to wait. for now, it's relatively calm. there's women, there's children, there's pensionists here. people are selling things like pretzels. it is very peaceful. things change very quickly. the one thing i point out is the police presence is far higher this time. our hotel and the two five-star hotels next to us entirely surrounded by wyoming riot police. they're standing three men deep, certainly not taking any risks.

these are the hotels that were attacked back in february. still got protesters joining the center square here. they're carrying banners saying things like change, the only road is to take to the streets, and also it's time for the people to rise. people very scared of an escalation in violence here. they're also closely watching what's going on in spain. a definite sense here that greece isn't the only country in europe pushing back on austerity and pushing back on cuts. for now, guys, back to you. >> okay, julia. thank you for that report. joining us onset, guy wolf. welcome. what did you attribute yesterday's late selloff to? where are you on that? >> i think it's really political hokie pokey going on in europe right now. >> what's it called?

>> hokey coky. >> in and out. >> that's the hokey pokey. >> in europe, it's the hokey coky. >> we don't change anything. it's the hokey pokey over here. it's back. it's the gift that keeps on giving. europe's going to be with us for years. >> oh yeah, it's going to be a problem for years and years. >> did the fed action push us to levels where we just are uncomfortable, the markets? >> no, i don't think so. i mean, the fed is -- my personal view is that the fed statement was excessive. and probably unnecessary. i think that at some point in the future, they'll be forced to step away from that policy. because it's all very well saying that we will do qe now,

but when you say that now when gasoline is pushing $6 a gallon, when headline rates are four and a half, when food prices are up 10% year on year, that is a completely different scenario. i think the social cost of qe in that environment is going to be sufficiently poor, that the fed will step away. >> we're getting these weird cross currents. i'm glad you're here to ask about it. when the fed did it, we thought wow, things are worse than we thought. consumer confidence seems to be improving. the market was doing better. there's a lot of things that look like -- what were you talking about? what was so bad that you saw in this economy? but again, the transportation average is now down for the year. china looks worse than it was. are we entering a -- are we doing okay and accelerating in terms of growth, or are we slowing down again? >> i think there's probably three things that feed into it. first the transition mechanism wasn't working. people were instead of going out

and buying risk assets and investigating companies, they were buying bonds in anticipation of the fed buying so. the operation twist was flattening the yield curve and trap iping liquidity there. i think the fact fact was constantly giving fixed numbers and fixed dates gives the market something to focus on when it ends. i think the fed wants to leave open-ended to remove that consistent focus on what happens when this thing runs out and we have to launch a new thing. >> but does that work? does it really take the market's focus off it at this point? it seems like all of a sudden people are foe cushion on what happens eventually and hue do you get out of it. >> to an extent, they made a mistake. i think the statement was committed the feds to . zero interest rates for a little too long. what i do agree with is shifting the bias away from mortgage backed securities. that has a higher probability of working in terms of getting money into household pockets. but i suspect that it will still

prove to be not quite the transmission mechanism they're looking for. you don't need to get increasingly direct. even if it gets to the point of the federal reserve needs to stop mailing checks. $500 a month to every household in america. that would be a direct transmission mechanism. of course, they're not going to do that except in the direst of circumstances. but we are heading towards that, i think. >> all right. i thank you for joining us today. have you been on before? >> yeah, i came back in june, i think, in the depth of the european crisis. >> i don't know if i was here. i don't remember. >> like having you here. we'll have you book again. >> thank you. >> when we come back, chinese stocks, as we were just talk about, falling to their lowest level in over 43 months. we will talk about the issues behind that selloff right after this. and then tomorrow, we have a huge lineup, including former treasury secretary larry summers. the whole council of economic advisers chairman marty

feldstein. and the staples co-founder. it all starts at 6:00 a.m. eastern. we'll be right back.

you can't go a day without major headlines surrounding china, and today is no different. japanese auto makers toyota and nissan are both slowing production in china. protests over a territorial dispute have been leading to anti-japanese sentiment, which could hurt demand for japanese

cars. should multi-national companies reconsider their china strategy? that's our question today. to answer it, we're joined by peter navarro, a professor at uc irvine. he is a cnbc contributor. thank you for being here this morning. what do you think of what's happening right now with japan and with china? how do we get past this? >> i think that's a great question. should executives re-evaluate their strategy? and i think absolutely. basically you've got several kinds of risk now in china. you've got the internal combustion risk protests over things like labor abuses, environmental abuses. and then you've got the external combustion, which is all this geopolitical risk with fights with japan, vietnam, philippines over iow over oil. we should note that china basically launched yesterday its first aircraft carrier, which is

going to be one of five, and that's going to create some issues with the u.s. pacific fleet in that area. so what i think corporate executives should do basically is if you don't sell it in china, don't make it in in chin. i think they need to diversify their offshore portfolio, think about producing in places like ohio, and recognize there is significant risk with china that doesn't exist with places like brazil, for example. >> peter, you're talking about two different things. one is to sell into a market, another is to manufacture in that market. and in terms of selling to the chinese market, a lot of people have said for a long time, it's too big of a market to ignore, but if you're talking about manufacturing, why would you say go back to the united states rather than move on to another country, which is what manufacturing facilities have done for decades at this point, move from one country to the next where they can get lower labor costs?

>> well, on the question of selling in to the chinese market, china's one of the biggest protectionists on the planet. so you can't really effectively sell into that market unless you go over, there set up facilities and become a minority partner with a chinese company and give them your technology. so those are pretty harsh rules. so if you want to sell there, you have to produce there. now, what i said was you should -- if you don't sell it there, don't make it there, you go to vietnam, go to brazil, go to mexico, but also think about coming back to places like milwaukee or cleveland or toledo because there is this geopolitical risk looming out there, particularly with china. you know, we go into the walmart, we spend a bunch of money on made in china products and at least some of that is going to rapid militarization of china. and it's a very different country in that respect from every other country on the planet. .

so corporate, i've been saying for several years now that corporate executives consistently underestimate the risk associated with playing in the china market. for investors, i mean, look, it's bearish what happened with caterpillar because of the slowing china economy. i think gm is going to get hit. i think yum brands which has a surprisingly large operation in china is going to get hit by the slowdown. so understanding china now i think is really important in both the board room and particularly for the small retail investor. >> sure. it'd mean a big deal for jobs here too if those manufacturers are listening and moving the jobs back. thank you very much, we appreciate your time. >> great to be with you, becky. >> coming up, double the guest hosts, double the fun, more about the global markets and economy at the top of the hour. so -- tell me again what happened.

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we are approaching the top of the hour, and the european markets under pressure. in france, the stocks are down 2%, and in germany, the dax is down by 1.6%. when we come back, we have a live report from athens where an anti-austerity strike is shutting down the country. plus, michelle caruso-cabrera brings us the story behind yesterday's violent protest in spain.

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the eurozone crisis in focus. an uprising over tax rises in spain. we have the latest from europe and what it means for your money. japan, china relations taking another turn for the worse. two japanese automakers shutting down plants in china as diplomats from both countries are set to meet. a closer look at how the souring relationship could hurt the american economy. and a double dose of guest hosts. on the fiscal cliff, qe-3, and where to put money to work now

as the second hour of "squawk box" begins right now. good morning, everybody. welcome back to "squawk box" on cnbc. i'm becky quick along with joe kernan. andrew's off today. we do have a great wednesday morning lineup for you. in just ten minutes, our guest host duo will join us onset. larry lindsay, ceo of the lindsay group. we're going to talk about europe, the markets, and the election. also at 7:40 this morning, john allison will talk financials and his new book. and the financial crisis and the free market cure, the book is being released tomorrow. also at 8:00 a.m. eastern time, we're going to welcome former presidential candidate howard dean. obviously a lot of people to talk to, a lot of things to talk about. let's get started with joe and this morning's headlines. >> beck, the futures this

morning are rebounding a little bit after one of the biggest losses we've seen, which is a commentary on the real lack of triple digit moves. and we haven't had many. in the last three, four months. we haven't had really nearly as many this year as we had in previous years. >> it was the worst performance for the s&p in three months. >> it's crazy. >> crazy. >> well, it's quiet, too quiet. sooner or later, something's going to be happening in this stock market and you better be watching. i know you don't think you have to now, but you do. big focus on europe this morning. you're looking at a live shot of athens. this is greece's first big anti-austerity strike since the coalition government took power in june. about 3,000 police twice the number that is usually deployed, and will stand guard in the center of athens today as authorities brace for the rioting that braced for past rallies. i know spain is sharply lower.

but you can see they are all are at least down a point or two, germany, about 1.5 points, julia chatterly is in athens. we talked to her earlier. good morning again, julia. >> reporter: good morning. well, we've now got tens of thousands of people here gathered here in the square. but the pictures you were just showing really not giving you sense of how many people are involved. they've been marching past parliament for the last hour and a half. and actually in the last two minutes, we had the first tear gas explosion in the distance. at least the square here where i'm just above is pretty calm right now despite the chants you can probably hear. this general strike was called by the two largest unions that covers the public and the private sector here and the communist party too. so in terms of numbers, we're talking around 1 1/2 million workers. it is the first general strike, though, that's been held since this coalition government came in to power just three months ago. and people that we've been speaking to certainly concerned that there could be an

escalation of the violence we saw back in february time. i think the important point to make today is this was meant to coincide with parliament voting through the cuts that are currently being discussed. of course that's not happening today, that's still to come. so the risk is that we see this again and perhaps with higher tensions. certainly people here very aware of what's going on. spain and very aware what's happened in portugal too with protests there. a sense that greece isn't the only country in eurozone protesting against austerity measures. for now, guys, back to you. >> julia, thank you very much. you can see the noise there behind. sweeping budget cuts and tax rises. sparking major protest in madrid, as well, spain's prime minister looking to save about $80 billion as part of a deal to try and help rescue the country's banks. our chief international correspondent joins us now with more. and michelle, you've been in greece when these protests have been going on and watching everything that's happened in

spain. >> and there have been a lot of protests that happened in spain over the last couple of years, but last night we actually saw police beating protesters. as the protesters surrounded the parliament building, screamed things like let us in, we want to evict you. that's a play on the whole concept of the high rates of foreclosure going on in spain because the terrible housing bubble they had and the subsequent crisis. this went on until about 9:30 last night madrid time and the crowds dispersed. they're saying about 15 arrests, 17 injured. we can see the pictures coming in last night and it was certainly some of the most violent stuff we have seen since some of the worst moments in athens. they are protesting today -- i mean last night and maybe again today, we're waiting to see because there's a new budget out tomorrow in spain where we expect they are going to announce more tax hikes and more budget cuts, what is likely to be controversial, what has been leaked is when it comes to pensions, increases in pensions

will no longer be linked to rises in inflation. the age of retirement is going to be sped up quite a lot. the other thing we're waiting for. >> higher? >> they're going to want you to retire at age 67 instead of 64, 65. >> in effect earlier. >> they were going to roll that out over 15 years, now much more quickly. we're also waiting to hear how much they think they're going to need for their bank recapitalization. that's the original bailout that spain wanted, right, was to recap the banks. we're going to get that number on friday. it's been heavily leaked it's going to be something like 80 billion euros. that's another event to watch for. but when it comes to the people on the street, it's the budget on thursday and how it's going to impact their lives. >> you said this was young people too. >> this was. >> you might expect older people talking about pensions, but these are the ones without jobs. >> the unemployment rate officially for young people in spain is 50%, that's been despidi

dispu disputed, it's enormously high regardless. and we see mostly in spain are organized by unions. this one was organized by young people, happened at night, that's why we were more likely to see violence there, as well. that's the difference in the tonality. >> it rose up off the streets. >> exactly. and they do it via social media and twitter. >> they pay for their devices, that's weird. they're fully in the 21st century with smartphones and pay for internet and apps? >> the mobile phone market is an example of when government doesn't get involved how cheap a product gets so everybody can have it. >> that's your angle you're going to take. there's an angle -- >> they have more cell phones than they have toilets. >> the angle in the "journal" today is that they're spending all their money on the apps to find out where to eat. so sooner or later, you're not going to be able to afford to go outside your house.

so all tociau're finally going to get your wish and do all your socializing on your phone. you'll be on facebook and never really encounter another person. for me, hopefully that'll -- >> do you have an iphone? >> i don't have an iphone. >> do you use it as a coaster? >> you have an ipad. >> there are things i don't like about it. >> like what? >> i don't know, my twitter page is weird looking and i keep hitting things and nothing happens and it gets bigger and it's like i don't want it to get back there. and then i say never mind and then i quit. and then i go to a raun, at least, i don't waste all my money. that's the thing. there's been a point made and this is going back to your ideology that maybe eventually all the young people in this country say you know what? i really wish i had a job because i want to buy all this stuff. i want to live in 2012, i want to get these apps, i want to go to these places i'm hearing about, take advantage of the groupon deals, and they look around and it's like, wow, i

don't have -- >> i call it clear thinking. >> michelle, thank you. >> see you later. in the meantime, toyota and nissan say they're going to be cutting production in china. relations have deteriorated pretty sharply after japan bought an uninhabited group of islands in the east china sea from the private owners. these are territories that are disputed. a lot of people, a lot of countries lay claim to them. sparked protest across china and disrupted production. toyota's going to be shutting the plant which was scheduled to close for eight days for national holidays, shutting for an additional four days. nissan will be suspending production at three plants, the shutdowns are expected to reduce the output by more than 20,000 units in september. >> did they play that nice music in the background? >> from the plants. >> what is that? i keep hearing that. >> it was nice. >> it might be -- i've actually been in plants in china where

they do -- i don't know if they do it on all of them. >> i don't hear it there. >> there it was. all right. up next, we're going to welcome, not one, but two special guests for the remainder of the show. we have pimco's neil cashari, right after the break. ♪ [ male announcer ] introducing a reason to look twice. the entirely new lexus es and the first-ever es hybrid. this is the pursuit of perfection.

it's in every paper and on every website and headline. and now the white house has chimed in. we're talking about the embarrassing nfl referee saga and the disputed call that gave the seahawks a victory over the packers on monday night. president barack obama deeming it terrible. declaring it was time to get regular officiating crews on the job. presidential rival mitt romney and gop running mate paul ryan who is a wisconsin native also said it was time to bring back the real refs. the nfl putting out a statement trying to explain the botched call which says a tape should have been called for offensive

pass interference in the call and the game should've ended. that call was not made and that portion of the call is not reviewable. the nfl went on to say that when both players come down with the ball, the simultaneous catch rule says the ball belongs to the offensive player. unfortunately, the other guy -- it wasn't a simultaneous cash. and any viewing of the replay you can see it wasn't. referees on the field ruled the catch as a touchdown for seattle, as you know, the replay reviewed the ruling and said there's no evidence to overturn the call. that's crap. >> it was a bad call. >> it was so easy to make the right call on this. therefore, the nfl has backed up the game call and the game is over. >> i don't know it was easy. i don't know a lot of people could've done it, but i do think the real refs could've done it. >> no, i don't think there's any rule that says when you look at it you can't see that guy caught it, the guy that intercepted it. all right. joining us on the set for the next two hours to hash out, not

this, but the economy. larry lindsay, director and ceo. first time he's gone negative on the fed. and neel kashkari, and there's not even anything contested. treasury secretary for international affairs and managing director and head of global equities at pimco. good morning to you both. >> good morning. >> you sent paul and mike brown down to cincinnati and they've made my life miserable for 20 years. so i blame you. actually, i think it's mike brown the problem, but at least the bengals are 2-1. >> the bengals are 2-1, the browns, every now and then there's fleeting moments, but they find a way to lose. i have a new motto, which is if the browns lose but i didn't watch, it's a win for me. >> and it didn't really happen, maybe? right. >> exactly.

maybe it didn't happen. >> you don't need to read that. larry does that now with the fed. they do things and you just pretend, you don't even want to know, do you? >> i probably don't want to know. unfortunately, i have to for my job. but, you know, i thought that jackson hole was one of the most interesting i had ever attended. >> he told you he would do it there, didn't he? >> when i heard the speech, i heard it as sort of a standard on the one hand, on the other hand you can hear what you wanted to hear. but i think that, you know, they think they have a mandate to deal with the employment situation. >> they did have a mandate. >> they have a complicated mandate. >> haven't the numbers been good recently? even right track, wrong track, you look at the president's approval rating. all of this goes into people feeling better about the economy. i was expecting to see huge

problems they knew before us. but housing prices? everything else, consumer confidence, those numbers were much better. this horrible economy that scared the hell out of bernanke, where is it? >> well, you know, i think we're in trend growth. and i have no problem with doing extraordinary things and extraordinary times. i thought qe 1, qe-2. >> you like qe-2? >> -- were appropriate. >> okay. >> but unless you have an extraordinary situation, doing something that's really out of the ordinary, i think is risking things. what are they going to do if, in fact, we do get into another extraordinary time. if this becomes the new ordinary, it's hard to imagine the fed's maneuvering room. i also think there's a difference between what the fed's doing and the ecb's doing. the ecb has admitted they're doing it to prop up fiscal policy. keep the spanish and italians from going broke. it's called fiscal dominance, they've confessed. in return, they're demanding

conditionality, whether they follow through, we'll see. they're at least telling the elected officials you've got to do your part of the job. i think the fed, maybe because it can't do otherwise, has told the congress, we're going to buy your bonds no matter what. i think that's keeping the pressure off the president, off the congress -- >> not good. >> not a good situation. >> you, meanwhile, work in a building full of keynesians and worse out of pimco. they love qe-2, give me more. may i have another, sir? >> the truth is we think qe-3 is good for financial markets in the short-term, but we are concerned about what the destination is. what does this ultimately lead to if the congress and white house don't get their act together. >> he just wrote a piece last night for cnbc.com where he said this is basically, called it the same thing as the refs, temporary refs that came in. you think the fed can do all

these things and they're perfect, but it's not, they don't have all the tools. >> and he also said, if it's good for financial markets, he's really worried. i don't know whether -- i'm sure you guys all talk, that here's where the s&p is and here's where it deserves to be and the rest is fed action. and sooner or later it comes home to roost. >> there's a lot of fed action, no question. even speak to when you mentioned consumer confidence is feeling better, people are spending more money, part of that is because of the fed and the fed is boosting up asset prices and people feel wealthier. i think bernanke is looking at that and saying our policies have had an effect on economy. we don't think more liquidity is going to lead to economic growth. we've talked about it before, it's like morphine, does not cure your underlying disease. unless we have fiscal authorities making reforms to make our economy more growth orie oriented, this will end badly if we're just printing money. >> beating us through to our

final days. >> palliative, not treating -- >> treating the cure not the symptoms. >> maybe, maybe, hopefully we're not a dying patient, but just treating the symptoms. >> if printing money actually works, there'd be no need for an economics profession, probably no need for cnbc, we'd just print money and everything would be fine. just print money and everything will be fine. >> yeah. >> and so the question is, you know, as neel said, this probably buys time. the question is, what do we do with the time? and so far, i don't think there's a lot of good indication that we're using the time wisely. >> good point too. >> if the president and congress had passed -- >> what do you want them to do? you want congress to save us. what can they do to save us? other than saving us from them by, you know -- >> if president obama and congress went and took simpson/bowles off the shelf and

passed as written -- >> you're talking about dealing with the deficit. you're not talking about the jobs act or any of this. >> to show the markets our political system can function, can make tough choices in advance of a crisis. we know we can act at time of crisis, but if we wait until we have an acute fiscal crisis like europe -- >> there's no way they're going to do it. >> i think it's possible. is the president, either president obama or president romney willing to govern as a moderate and bring the country together? i think it's possible. >> larry, do you think it's possible? >> everything's possible. >> you think it's likely? >> that was a no. >> you know, i certainly hope so. and i think they will respond to a cries. crisis. that's the way that washington acts. but the palliative is to dampen down a crisis. if the chairman's estimates of the effective qe comes true,

we're going to be down to an average cost of borrowing from the government of 60 basis points, .6 of a percentage point. why would any congress not borrow and spend if they could borrow at 60 basis points. there's no price signal. >> and in the past, it's been the bond market that created the crisis and said you're going to change your ways and change them today. >> but $85 billion a month in fed purchases, they are buying the entire deficit. >> they are the market. >> they are the market. >> at this point. there's no real market left to rise up and say, hang on, this is a problem. >> and i like to scare myself sometimes, and it is, you know -- giving a speech today, and i don't know how that ends up, but you said if there ever comes another time when we really need extraordinary measures, and i don't know where that would go. china probably couldn't do it, but if there were something really bad happening with iran and israel in the straits of

hormuz and everything like that, that's the kind of thing where we might need the fed to be in a position to do something extraordina extraordinary, right? and they can't anymore. >> watching events in libya. you and i are old enough to remember 1978 and 1979. >> true. >> it was sort of deja vu. >> so many times. >> so many times. >> and it seems to coincide with political upheaval back here. it's very weird. and then we throw europe in and china in. i always am thinking back on this. the guy that writes this crazy stuff about 2012 and here we are in september and the end of the world isn't coming, then we get -- lose four guys at the embassy and it spreads to egypt and ahmadinejad comes to, you know, the u.n. to give a speech and saying this country is only 70 years old, we're 7,000 years old, and it will be gone from the map eventually. that's basically what he's sayirigh>> that's what he said.

>> it scares me. there's a lot of risk. we should be worried about the risk in the marketplace. that's what you've been saying all along. >> yeah. a long time. fortunately, we have these two gentlemen staying with us for the rest of the program. we are also following the situation in greece. protesters there turning violent. we've seen some molotov cocktails thrown at police and police responding with gas canisters. we'll keep you posted on the situation and market reaction. you can see some flames there right now. this country was built by working people.

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on youtube. the rapper was raised in gangnam, and that's the most up market in korea, considered the beverly hills of seoul. he went to berkeley college of music and was also a business school dropout. and since the song's debut his father's tech company, that stock has doubled on the seoul stock exchange. this gentleman plans a new record release in the u.s. in november. this stupid "call me maybe" thing too. i didn't understand that either. you would have done that? i wouldn't do that. i refused. i felt bad for the harvard baseball team. >> they were great. they were funny. >> i was embarrassed for those guys. >> because we don't do dumber things every day. >> yeah, you're right.

we're following live pictures coming out of greece. the country holding a 24-hour strike within the last half hour. anarchists dressed in black arrived in athens. they set a tent area where tv journalists were broadcasting from on fire. and, you know, you always like it when the anarchists show up. what do they want? >> anarchy. >> she's right. >> what happens when you have anarchy. what's good for them about anarchy. i think they like breaking things. >> you have nothing to lose. >> some men just like to watch the world burn. when we got married. i had three kids. and she became the full time mother of three. it was soccer, and ballet, and cheerleading, and baseball. those years were crazy.

so, as we go into this next phase, you know, a big part of it for us is that there isn't anything on the schedule.

riots breaking out in athens this morning. protests turning violent. michelle caruso-cabrera has been following developments. and you thought this might happen and things have heated up a bit. >> often predicted for athens. let's go to the live picture, you can see molotov cocktails being thrown right now, police are beating protesters trying to get too close to parliament. it's the center of athens where there is a big protest today. they've been trying to move toward the parliament, but as you can see, the police have

been throwing tear gas trying to push them back. then often times the protesters take the tear gas and kick it right back at the police. the type of violence that we are used to seeing now, unfortunately, in athens repeatedly due to the same thing over and over again, budget cuts, that means more people losing their jobs, more salary cuts, the country just does not bring in enough tax revenue to pay their bills. and you can see what's happening here. as they try to move people out from the square as they try to hold up their protest sign. we saw an earlier set set up for anchors trying to broadcast news coverage from the location. that was burned down by the protesters. nobody in that particular set at the time. but we expect this to happen throughout the session. we've got a colleague on the ground there, one of the buildings there, julia chatterly, the tear gas has prevented them from coming out on the balcony.

and there's a tree to the left of parliament that is on fire and we'll be watching this throughout the morning. we've seen this before, and i'm sure we're going to watch this throughout the session. we saw violence yesterday in madrid as well, becky, where they're trying to come to grips with the fact they don't have enough money to pay their bills and where it's going to come from and how will they come up with the money? and this is what you see playing out on the streets. >> and michelle, as we've been watching these pictures, we have seen a downturn in the markets and showed what was happening in europe. and now markets down by as much as 2.25%. >> and importantly, spain's interest rates in the last 24 hours have risen sharply. and that'll be the key breaking point as to whether the government finally knuckles down and says we're going to have to get a bailout from the european union to keep our interest rates low. >> the ten-year for spanish bond yields for the ten-year earlier

this morning were above 6%. and i think when we talked to you before, you talked about they're just below that at 5.99%, i think it's probably closer to 7% or 8% that would push spain into a position of being forced to ask for a rescue? >> the folks who want -- don't want bailouts to happen forced spain all the way to 8%. force them to live with that level of paying on their debt and force them to do the tough things to their economy that they don't want to do. we have historically seen countries, greece, portugal, ireland come in when their ten-year yield gets to 7%. it becomes much more expensive to fund them. you can try to refinance yourself at a short-term rate over and over and over again, but you're always playing this game of chicken with the markets. what's it going to be like in a year? >> or shorter term than that. >> let's look at some of the other markets. we had seen positive arrows

across the border earlier. and you now can see the nasdaq is in negative territory at this point. dow futures up by about 10 points, s&p is barely positive after yesterday where the markets closed down on the lows. it was the worst day for the month of september for the dow. the worst day for two months for the nasdaq and three months for the s&p 500. as joe pointed out because we have not seen major moves in quite a while for these markets. 100-point drop is the worst we've seen for the dow in the entire month of september. oil prices have also been coming down this morning. even before we saw any of these pictures, we were looking at oil in the $90 and change range. right now down by $1 and change. the ten-year yield here in america is at 1.651%, so still below 1.7% as we saw yesterday. dollar had been picking up some strength. and in fact, right now, looking at the euro at 1.285, well below

the 1.30. gold prices have dipped slightly, down about $2.70, down. still to come on "squawk box," the master of metals running one of the world's largest hedge fubds. up next, though, why pure capitalism is the world economy's only hope. it's the topic a former bb & t ceo's book. he'll join us right after the break.

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let's develop more stars in education. let's invest in our teachers... ...so they can inspire our students. let's solve this. welcome back, everybody. the u.s. economy is on the mend. joining us right no with his solution is john allison, the former bb & t chairman and ceo and the author of a new book it's called "the financial crisis and the free market cure: why capitalism is the world economy's only hope." john, thank you for joining us this morning.

>> good morning. >> you wrote this book because you wanted to push back at the idea that grieve on wall street and deregulation of the banks is what caused the crisis. >> the left has done a great job of creating myth. the myth that roosevelt ended the depression, when, in fact, his policies were eliminated. they did a nice job of creating a very destructive myth that the banking industry was deregulated and then greed was what caused the financial crisis. first, it wasn't deregulated, there was always greed on wall street. there was no epidemic, it was government policy that caused the financial crisis. primary mistakes made by the federal reserve and in trying to eliminate a minor correction in the 2000s, and ended up in a correction in 2007 and 2008, starting with the community investment acts but really bad mistakes in affordable housing through freddie mac and fannie m mae. >> mortgage brokers handing out

money left and right to people who probably shouldn't have been in the houses. >> that was incentive by the government. the government wanted to increase the home ownership in the united states. so much of the financial crisis written is not true. i had the opportunity, i was ceo of bb & t for 20 years, larry and i were just talking about, we met years ago, i knew bernanke, knew greenspan, all the ceos of large financial institutions and this is, i believe, the first book that actually tells people what really happened in the total context. going back to the early '70s, working through what happened with community reinvestment act, freddie and fannie. the impact on decision makers, a lot of books written by congress that don't really understand what the impact of regulations have on people trying to make decisions. if somebody threatens to put you in jail, closes your bank down, you're going to do things that you may have a lot of discomfort with. and this is something joe would be interested in. i talk a lot about philosophy.

bb & t did better than any other institution. all of our management, and another reason, this is interesting, i think a lot of ceos were victims of what the economic courses they took in the late 1960s and early '70s that was keynesianism. >> i want to start with your premise about what started it. neel, what do you think about this? >> human societies are prone to mass illusion. there were a lot of participators that participated, but at the end of the day, i bought a home in 2005, believed that home prices only go up. >> right. >> all of our risk models were based on that basic assumption. when that assumption proved to be false, all of these risks blew up and a lot of banks had way more losses than they'd ever understood, a lot of mortgage back securities blew up. i think homeowners had a role to play, the entire country participated in this delusion. and unfortunately, regulation

cannot prevent a mass delusion 50 years from now or 100 years from now. >> the delusion was not a delusion. it was in the sense of it was a policy. incented since the early 1990s, every time the housing market went down, the fed printed a bunch of money. >> and people like barney frank or even republican presidents patted themselves on the back we were getting homes -- you think you want to be paying mr. potter money, you want one of those nice houses and it's an american dream, and we want to get people who can't afford it into houses because they're going to keep going up and have equity. >> it was a delusion based on policy. >> well-intended policy like so many policies. >> but imagine if chairman greenspan at the time had stood up and said, hey, everyone, i can see a housing bubble. i know better, i'm going to clamp down on mortgage lending rates. the country would've gone crazy. congressmen and women would've said you're preventing first-time home buyers from

participating in the american dream. very hard for any one regulator to stand up and push back against the entire country. >> john, you have remedies for all of this. are you going to be able to put that off for four more years? and will we be able to four more years from now if things don't go right in november? >> i don't think so. you know what, it's possible. depends on what happens in the four years. >> instead of the famous 47%, in four years we'll be at 51% and there'll never be another election. >> that's a tremendous risk. and, in fact, mathematically if we don't change radically in the next ten years, we can't fix it without any kind of serious real economic correction. if we don't act quickly, even the politics, the numbers, the mathematics are scary. in 20 years, the united states goes broke by any kind of reasoning unless we change direction pretty rally. it can't be done without some pain. and i just want to comment on the fed. greenspan doesn't have to talk

about housing policy. all he had to do was raise interest rates to where they should have been in the market. and the reason that's relevant, that's what bernanke -- >> we don't do that. >> we're doing it today. we're doing -- >> you're talking about after 2001 when rates were brought down and left low. >> yeah, created negative real interest rates. you can't create a bigger incentive. didn't have to say a thing about housing. >> we let rates go back where they should be. 2015, we'll let the market dictate rates because it'll be so rich by then. >> and also, what we're doing to savers is really bad. we're stealing from old people and that can't be good from a long-term perspective. >> when there's so many old people, it's a burgeoning group of people. thanks for the book, but i remember at the end of that commercial back in '78, the native american had a little tear going down his cheek.

your book's not going to help. >> well, maybe -- >> capitalism is not a good thing right now, john. it's not in vogue. >> i agree with that, but we have to fight. >> the battle. he says it's going to take decades. >> i agree. the real problem is in the school system. but you can't let history be written that's wrong. because that's the -- the left is lived on these myths. and frankly i think i'm the only person that actually saw all this on the inside because of my long tenure and my interest in philosophy, i think in the book will give people a different perspective. all these books written by people who don't know what they're talking about. or the people that understood one sliver of the market. >> did paul krugman write a little comment for the back? >> i couldn't get it. >> did he turn you down? >> i got a lot of ceos. >> you did, huh? >> a lot of ceos that understood what this meant. and this is a book for people that want to see the big picture and understand. >> they were part of the problem as we now know.

thank you for coming in, as always, good luck with the book. we'll bring it up one more time and take a look at it. i mean, you can read it, it's probably pointless. but anyway, get it. coming up, real estate is now the time to buy. more on the situation in greece, and market reaction overseas. a live shot of athens where protests and riots are in full swing. take a good look. >> they put out that fire. still to come this morning, former presidential candidate howard dean will talk taxes, health care, and the economy when we return. [ male announcer ] the 2013 smart comes with 8 airbags, a crash management system and the world's only tridion safety cell which can withstand over three and a half tons. small in size. big on safety.

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anyway, the fed says rates will be at an all-time low until at least 2015. so think about where we are in the election right now. we will be at the same point in the next election. and we'll all be wondering hillary versus -- so what's the rush to buy a home? let's ask our resident mortgage guru, the vice president and chief market strategist of residential finance corporation. were you listening to john allison? >> i was. i enjoyed john's comments very much. >> were you ramming mortgages down unsuspecting -- >> no, i heard that comment. that hurt a little bit. >> he wasn't talking about you, barry, but there were people who were making mortgages they

weren't checking out. that people couldn't even verify they were employed at that point. >> clearly, they were not a 100% angelic group. the vast majority, we're good people, though. and you have to remember these programs out there, when you're talking about a 580 fico score, 100% loan to value and no income verification, it was a bad idea. but it wasn't the mortgage companies that came up with this, it was the credit agencies, and nobody points a finger at them. and that's the thing almost maddening to see that they kind of got away with it scot-free. >> aig guaranteeing they had the credit default stuff they didn't put any insurance. it was a house of cards. >> a nationwide delusion. >> and neel was right. describe it that way, almost a global delusion, time of credit bubble. >> so barry, qe-3 now. so can people get, rates are

low, but can they get them now? >> the last time we talked about, are they going to do qe-3? they probably will. they deal with mortgage back securities. well, mortgage-back securities have kind of this built-in pay down mechanism. now, mortgage-backed securities also can bring down the overall bond market because of just the natural layers. it's probably what they were looking to do. >> bring down the rates? >> bring down the rates, correct. so when you talk about interest rates where they are right now, all-time low levels, can they go down a little bit further? yeah, it's quite possible they will, but looks like we have put a bottom in housing, and home prices are starting to move up, they're not rocketing higher, but the small move up matters. >> is it hard to get a loan, though? >> it's really not. you can get a loan with 3.5% down. >> 3.5%? >> yeah. >> did you get one? >> it's a pain. >> you have to document it now. it's not like -- >> you have to like basically

give them blood, sign your first born child away. >> you're right. clearly it's not -- >> i can't imagine putting down 3.5% and being able to go through the process. >> yeah, it's the same process because it's selling that transaction. you know, back in the day when things were too loose, it was, here, fog up this mirror, yeah, you're approved. it's gone to the other extreme, we understand that. but you can get a loan, it's not that painful. yeah, it takes some time. it's worth it. look at the rates you're able to get today. and home prices really haven't taken that move higher yet. they're about to. look at where rents are, we're about to see that, which is why do i rate for rates to come down more? >> and that's what the front page of the "wall street journal" is talking about. in july, you actually saw a move of better than 5%. larry, you've been watching this stuff, better than 5%. that's a pretty major move for what we've seen. >> i think where we're going to see the "inflation" is in rental costs.

and that's going to get owner's equivalent in rent. most of the buyable, livable demand in housing has been bought by the investor class and is being rented out. i don't see a lot of extra supply coming on. the demographics are still very, very supportive of rents going up, home ownership going down. i think we're going to start seeing pressure on the rent side going forward. and that's where i would look for quote inflation. >> we're seeing 7% year-over-year increases in rent right now. and, you know, yeah, while it might be hard to get a mortgage, try and find an apartment or a good rental property. a, they're expensive, not easy to find. and people have been burned. and they are afraid to jump back into the housing market. that old saying, a cap that sits on a hot stove won't sit on another stove. people feel that way. they haven't yet made the move. but the financial differential is giving people now an

incentive to say, wait a minute, i'm renting here, i can own and on top of it i get a tax break. people starting to make that shift. >> are you seeing the fed's actions getting passed down to actual borrowers? or is it being captured by the bank. in terms of more attractive mortgage rates. >> rates are at an all-time low. spreads have widened. i think part of that is because of dodd/frank. we've talked about this before, you no longer have to chase the brokers away. brokers have to show what they're earning. you have that kind of conscious before you talk to a borrower. i think the spreads have widened a little bit. >> the thing i think consumers need to remember, and they change their mind sure. it's not a mortgage rate. with the inflation, fed funds can be here but mortgage can start to escalate, that's where people can lose money and lose opportunity. >> thank you.

>> when we come back, austerity protests and riots breaking out this morning in athens. things have quieted down a bit now. we will have a live report on this situation right after this. and then howard dean is going to join our guest host today, larry lindsey and neel kashkari to talk about the elections. now, that's what i call a test drive. silverado! the most dependable, longest lasting, full-size pickups on the road. so, what do you think? [ engine revs ] i'll take it.

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one more hour with our guest hosts. >> we are all very concerned about what the destination is. they are buying the entire deficit. and the case for precious metals. >> i love gold. it's too early to cheerlead a bull market in equities. we're going to find out where his funds are investing more than $10 billion. and we are one week away from the presidential debate. >> what you just said is one of the most insanely idiotic things i've ever heard. >> a simple wrong would've done just fine. >> we'll convene our debate prep session with our guest hosts and howard dean, former governor and dnc chair. the third hour of "squawk box" begins right now.

welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernan along with becky quick. our guest host is neel kashkari. i'd be proud to say -- who did we have on yesterday? someone on talking about who saved the world, saying that, oh, it was barry diller. >> right, right. >> barry said that the president had helped to avert a much worse situation. but actually it goes back to bush and pall paulson and t.a.r.p. >> in hindsight, we didn't know if our programs were going to work. we feel very good that they were effective in stabilizing the financial system, and the fact it's coming back at roughly break even is a resounding success beyond our expectation. >> i watch you and it's like

when i kid around, you never flinch because you were in a period where there were some more serious things going on. i bet a lot of things you do now don't seem to have quite the gravity or seriousness of that time. >> yeah, i don't feel -- i'll never again feel in my life the kind of pressure we felt, that many of us felt during that time. >> even on this show. the grilling that they'd give you. >> it's like warm milk. >> that was the great comment, the guy going in the fed -- >> it was blankfein. >> calm down, you know, wipe the vomit off your jacket, you're going to be okay. and larry lindsey, ceo of the lindsey group, former director of the economic council, you've done great service to the country too over your time. and some administrations, right? >> not everyone thinks that, but thank you. >> well, i think of you and i'm being really honest. you told the truth about the

iraq war and got punished for it, but you never really turned on like so many people that leave an administration and then they're bitter and go back and say something, you had never done that even though i think you were treated badly. >> well, i was fortunate to be able to serve. >> all right. they call it squawkward box at times. >> 9/11 was tough, as well. >> 9/11. what was your capacity in that? >> nac director. and i was -- i remember the secret service running down the halls saying run, run, run incoming plane. that's kind of a memory that sticks with you too. >> people don't remember the market cap loss was trillions that week. >> well, the president came -- when the president came in to office, president bush, we had 6 trillion in equity market losses that president bush inherited

from herpredecessor. everything was great in the '90s. >> the internet bubble. >> the blue chip bubble. >> valued at 50 times earnings. >> had all come down and there was economic, looks like a minor crisis at the time but it felt like a big one. so it goes with the territory, and i think the country will weather this crisis, as well. it's going to take a while, but, you know, in the end i think the country does come together. i don't think -- i don't think we see the end of america coming at all. >> what was the number i don't have used on the iraq war? >> it was less than what it turned out. >> that's what i mean. >> it was 200. >> what did it turn out to be? >> probably close to $1 trillion. >> you said 200, right? and it was $1 trillion. >> yeah. so, you know -- i'm the most pessimistic guy in the room, but usually not pessimistic enough. >> we should believe you when you say things. >> amazing.

politics, man. i'm so glad we just sit and watch it. >> you're not kidding. thank you so much. >> exactly. protests in greece turning violent this morning. michelle caruso-cabrera has been monitoring what's been going on over there. and is it about what we saw last time? molotov cocktails and tear gas. >> absolutely. let's show you a live picture of the capital of greece right now, athens, things have calmed down a bit after thousands of people with tear gas, protesters have been throwing molotov cocktails. let me show you some of the video of what was happening earlier. a lot of tear gas in the air at the time. one of our colleagues was forced inside. these are pictures of what we've seen before. the guys in black with the hoods, et cetera, are anarchists. we should point out the reason these protests are happening is once again they're talking about another round. another round of austerity

measures that are going to include salary cuts, reductions in pensions, probably more tax hikes as they continue to try to meet the requirements to balance their budget even though they bring in less and less and less tax revenue because they are sliding deeper and deeper -- let's not call it a recession, let's call it a full-on depression. two major european capitals in the last 24 hours seeing violence. we show the video from madrid last night. very, very similar, young people trying to surround the parliament there. shouting things like we want to come in and evict you. they were dispersed by police. but you can see, we were watching a live feed, protesters being beaten by police as they try to push them back. we did not see tear gas, but there was. we do see rubber bullets being shot. they dispersed around 9:30 madrid time last night. waiting to see if there's going to be more protests there today. the reason they are protesting

in spain is because once again another budget expected tomorrow. that is expected to include a lot of cuts to social spending and also increases in taxes, as well, as they too try to balance their budgets even as they face a recession which brings in less and less tax revenues. when you compare greece to spain, spain's done a lot more when it comes to doing things to try to fix their economy and make it work better. labor laws that make it a lot easier to hire and then to fire if you don't think you can fire, then you're less likely to hire, and that really prevented a lot of things happening in spain. they changed that back in february. maybe we'll start to see the effects. greece has so far refused to do so many things. face off against all of duopolies that prevent any kind of competition, the lowering of prices, whether it's the fuel market, the pharmaceutical market, et cetera. they've just shown very little

political will to do the very tough things that need to be done. it's easier in greece to raise taxes and cut salaries than it is to do some of this other stuff that would actually make the economy grow. back to you. >> thank you. all of these pictures we've been seeing, the pictures out of both spain and out of greece over the last 18 hours or so, they have certainly had their impact on the markets. if you take a look at the u.s. equity futures at this hour, we had been looking at gains of around 20 to 30 points for the dow futures. the s&p 500 and the nasdaq have both turned negative. down by a third of a point, the nasdaq down by 2.25. the dow futures have given a lot of their gains back, up by about 7 1/2 points. and this is all coming after a close yesterday where we saw the equity markets closing on their lowest levels of the day. that was down by about 100 points and that counts as the worst performance for the dow for the entire month of september. nasdaq looking at the worst

performance in two months. reporting the worst performance in three months. we have not seen a ton of volatility, but all of these pictures and the implications of europe certainly taking their toll. happened also overseas in asia. stocks there fell across the board overnight. you'll see the nikkei closed down by about 2%, in shanghai the composite down by 1.25%. same story if you look at the markets right now in europe and what's been happening there. we have seen red arrows that have, well, the losses have increased as we've been watching these pictures. right now in france, the cac is down by 2.3%, ftse is down by 1.25%. all happening as we watch the ten-year in spain. this has been a key because that yield has been getting pushed higher at 6% now. and it's starting to get to prices where people worry what spain's going to have to do. will they have to seek a bailout? and will this be the thing that pushes them?

we'll keep an eye on the spanish ten-year. and other global news, iran's president will address the united nations general assembly today. mahmoud ahmadinejad is expected to defend iran's nuclear program which he insists is being used for peaceful purposes. many fear that the issue could drive israel to attack iran's nuclear facilities. israel has urged delegates to boycott the speech. that is just bizarre, it happens to be the holiest day on the hebrew calendar when this gentleman, and i use the term loosely, is expected to speak. meanwhile, thousands plan to protest outside the u.n. as he is speaking. and most western diplomats -- >> won't come. >> yeah, they turn around and walk out. but you really -- do we not really read stuff that he's -- you can quote him saying that, you know, iran's been around for 7,000 years and israel's been

here for 70. it's not going to be here soon. it'll be us. a little footnote in history that it was -- which basically says -- >> we're going to wipe them out. >> we're going to wipe them off the map. >> the united nations, why do we fund the united nations is the question. not why does he get to talk? a lot of people wonder when all they do is they're not really nice to us even though we fund it and have it in our country. >> well, you wonder how effective it is too when five years ago they said they would make sure they never stood by for genocide and nothing happened in syria. >> it's usefulness seems to be diminishing every year. >> it's useful to certain places. useful to the axis of evil. can i still use that? did you come up with that? >> no, i did not come up with that. >> it's true, isn't it? >> it is true. and we're now going to let the u.n. decide our trial policy here.

let them oversee adoption and adhd and everything else. >> what? >> i mean, these guys maintain the peace. do we really want them to oversee american policy toward our children? i don't get it. >> global villains. global villains. got a lot of bad people. >> we do. when we come back, the first presidential debate is one week away and we'll talk political strategy and howard dean. in the next half hour, eric strot has more than $10 billion under management with the focus on precious metals and commodities. where he's putting his money and how qe-3 has changed his outlook. stick around. [ male announcer ] introducing a reason to look twice. the entirely new lexus es and the first-ever es hybrid. this is the pursuit of perfection.

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we are just one week away from the first presidential debate. and 41 days away from the general election. joining us right now is former chairman of the dnc, howard dean. and great to see you this morning. >> how would you describe the situation right now in terms of where we stand in the election? >> i think it keeps looking

worse and worse for governor romney. there's some polls out today which have obama up by double digits and florida and ohio. that's just not a situation. now, they may be wrong, the polls certainly don't have to be right. but it's a bad situation. on the other hand, debates can change a lot of things. so this is a big deal, these debates. >> obviously you're a supporter of president obama. but what do you think that mitt romney needs to do in this debate to reach out to people? >> he's going to have to give us a coherent view of what he thinks. i think his biggest problem is he's all over the map all the time. the 47% thing was really damaging and then he came back and said, well, no, i'm for everybody. then he said that people could get, you know, were had universal health insurance. if they need health insurance, they go to the emergency room. that doesn't sit well. >> i've got to watch you like a hawk. i enjoyed having you on kudlow the other night. double digits to you is nine points.

how does that work? >> close, close. >> you can't round up when it is nine. do you round up six to double digits? >> i try not to do that. >> you know i'm sitting here. >> i'm closer than larry lindsey was about the close of the iraq

war. >> you got two guesses, i shouldn't do this, but i'm fascinated to ask neel about the imf report yesterday that said the banks were in no better shape than it was before. >> well, to be honest, i haven't read the imf report. in fact, right now, the question is the banks have is are their business models viable going forward. many of the big banks are trading for less than tangible book value. i think the banks have a lot more capital, they're a lot safer. whether or not they're going to be profitable enterprises for the next 10 or the 20 years, we don't know yet. >> i don't mind if they're not profitable, but i mind if they're goi banks to recapitali. i think europe has a ways to go before we really know how sound the european banks are. >> governor dean, if you're caring about whether or not they're profitable, they will collapse. tough be profitable to avoid -- i know that's a tough concept. >> no, no, i'm talking about -- i'm talking about what normal people think of profits, not wall street. wall street says if they're not profitable, they're not going up 20% a year. it's that sort of nonsense has got to go away from the thinking about wall street. >> but the viability of the business model is exactly the issue. if you have a completely flat yield curve, if you have overregulation, you can't make the money that sustains the institution. and i think we really start that -- do have to start to worry about that fact. we do not have a viable regulatory model going forward under dodd/frank what have you for these guys to survive.

we are inviting the next crisis. >> here's the problem. fine, that's fine, too much regulation is maybe not a good thing. what about what happened to jpmorgan last month. we don't have enough regulation yet. for that stuff to still be going on. >> banks lose money. they lost a lot more money -- fine, that's a tenth of a percent or something. they lose money on industrial loans too. i get nervous when you seem to be saying that a certain amount of profit is okay, but you shouldn't try to maximize profits. >> you shouldn't try to take undue risks that don't make sense. and that's why i was nervous about the imf report. >> but in general, you think a corporation should maximize profits. >> yeah, that's the duty. what i don't think they should do. here's where i think we fundamentally disagree. >> yeah. >> i think the problem is, i think the biggest enemy of american capitalism is american capitalists. because they're so short-termed in their thinking, we need -- i think if you want to be really

profitable, make money over the long-term. i think that's a good thing, it creates jobs. if you focus things on credit default swaps and collateralized mortgage negotiations, and all of a sudden you're going to fall off the cliff and you haven't started any jobs. >> i think that the president is now kind of teflon in certain cases. you've got ahmadinejad, you know, and he's here saying this stuff. you're a big israel supporter, not meeting with netanyahu, not meeting with any of the leaders that are in town but going on "the view." if romney did something like that, if you were advising the administration, wouldn't you think sooner or later someone might notice this stuff? >> well, i think the idea of ahmadinejad speaking to the u.n. and the world is outrageous. i'm a supporter of the u.n. because i think it's worth it to have it as ineffective as they are because it's important to mainta maintain dialogue, but this --

someone really screwed that up. do i think, look, obama, i get what obama's doing, he comes here and meets with four leaders and there's 25 that wonder why he didn't meet with them. he doesn't need that. >> what about netanyahu? >> well, netanyahu's been a problem. when you send the vice president to israel and the housing minister announces they're going to move into the settlements and have more illegal settlements. >> yeah. >> this is a personal problem. i don't think it's a problem between israel and america, i think it's a problem between netanyahu and obama. >> yeah. all right. >> i guess we've got to go. >> you all right? we get to see each other almost every week now. >> it's amazing. you did a great job on kudlow. >> i loved hearing you. and what we have is what this country needs. i don't know why we can't get it, do you? >> yeah, we can work this stuff out if we can sit down and talk instead of sloganeeing all the

time. >> well, you forget the 9 million. >> i've got to watch you like a hawk. but anyway, thanks, governor, we appreciate it. >> see you guys later, thanks. coming up, the case for precious metals. where eric sprott is raising investing more than $10 billion. >> rise of the machines. >> it's coming. it's coming. after watching that jeopardy with that ibm, it's coming. california moving one step closer to sky net. at optionsxpress we create easy-to-use, powerful trading tools for all. like our all-in-one trade ticket. we put strategies, chains and positions all on one screen. start trading today with optionsxpress by charles schwab.

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welcome back. "squawk box." california bringing us one step closer to the rise of the machines. governor jerry brown assigned a law that allows self-driving cars on to public roads. the law will go into effect next year and establishes safety and performance regulations for testing driverless cars. the law does require a licensed driver to be ready to take control if necessary. nevada and florida -- >> reading a book -- >> like we do now when we're driving. and nevada and florida have passed laws allowing self-driving cars. governor brown road to the ceremony in a prius that google

modified to steer itself. the driverless cars use video camera, radar sensors and lasers to navigate. >> have you never had a computer reboot on you? >> well, just wait until all these cars get together and all the computers finally decide they don't -- >> they don't need the humans. >> and they don't like people with flesh and bones. >> now we need new jobs for taxi drivers put out of work. >> i can't believe this is actually happening. >> see what happened to that poor guy tumbling in space over and over again. >> i'm afraid i cannot do that. >> you think he's crazy, he's not. and who wrote it? arthur c. clark? >> yeah. up next, it was a few years ago that twitter revolutionized media and became part of daily life for millions of people. julia boorstin spoke to the ceo of twitter. did you tweet about it, julia? >> i did, and i will continue to tweet about it today, joe, as we roll out those sound bites.

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welcome back to "squawk box," everyone. ever since facebook's ipo, people have been wondering what it all means for the most powerful social giant, and that's twitter. julia boorstin sat down with twitter ceo at the new san francisco headquarters. and julia, what can you tell us about how they're viewing everything that just happened? >> well, becky, i spoke about twitter's ads, the user experience, and where they're willing to leave money on the table. we started off discussing the company's future and whether or not he wants to take the company public. >> the twitter ipo question, not something we're focused on right now. i think about ipos as a mechanism for financing the growth of the company. and when i think about the growth of the company, i'm focused specifically on user growth, user engagement and growing the team and creating the best team internally. there'll come a time when we need to start talking about what's the best way to finance

the future growth of the company and then we'll have that conversation. >> that time come in 2013? >> i'm not focused on when, what the date for any of that financing is right now. >> are you under pressure based on the number of shareholders or any of these other regulatory factors? to go public at some point? >> no. the interesting thing about the regulatory change in the number of shareholders is i think it provides private companies with a lot more flexibility. and i think that's all fantastic. that doesn't have any bearing on the decision we would or wouldn't make as to when to be a public company. it will be based on a decision we make about when we think the timing is right for us, not any sort of regulatory issue or market timing issue. >> how has facebook's ipo debacle changed your perspective on going public? >> nothing external to the company has had any bearing on how i think when to take twitter public or not to.

>> if going public in the near future isn't happening, is twitter a takeover target? >> we have ever belief in the world, and when i say we, all of us here inside the company. and, in fact, not just the employees of the company, the board of directors. we have every belief that we are building one of the lasting digital technology companies in the world and that we will be a permanent member of the digital constellation. >> does that mean you'll be a digital member -- >> we have every belief we're going to be an independent company and we've got the engine we need to be a successful, independent company. >> for the right price, would you sell to an apple or google? >> we have ever hope and belief we'll be a successful, independent company. >> and the key to that success will undoubted line advertising. twitter ads have been more

effective than other digital platforms. coming up on "squawk on the street," we'll have the ad business and his thoughts on the company's next potential gold mine. becky? >> thank you very much. that's julia boorstin who will have more of that interview coming up. with interest rates near zero, where can you find value in a low to no-yield environment. joining us now is eric sprott, ceo and cio at sprott asset management. a long/short equity strategy with $10 billion in assets. over 80% of the fund is allocated in precious metals. and is there anyone that liked qe-3 more than you, eric? >> i don't think anybody has quite the concentration that we have, joe. but we're happy to have it, by the way. >> happy to have the concentration. happy to have qe-3. at this point, do you ever take off some positions when you've gotten what you wanted? haven't you gotten most of what you wanted already? and aren't you thinking about

standing near the side or no? >> well, joe, it's interesting. i go back to the reason i got in gold was in 2000. and at that time there was some wonderful work done on the gold supply/demand market by a guy named frank vanderoso. and he suggested it would be a shortage of physical in that year and wrote a book. and because the nasdaq had gone down and we ran then only long funds, where can we hide out here? and i thought gold was the obvious answer, precious metals generally. and you might be surprised to realize that the gold stocks since the 2000 bond were up something like 1,500%. gold is up 600%. and in a way, i call it the great wealth redistribution because those who have invested in gold and silver have prospered quite nicely.

to your question whether or not i want to stay with the trade. the reason i would stay with the trade and you mentioned qe-3. i never would've imagined when i got involved in gold i would have the benefit of kind of irresponsible money printing, bank runs that are ongoing as we witnessed in the various countries in europe, and those two ingredients along with the qe-3 which has been announced i think will be a huge tail wind for gold and other precious metals to go higher. >> you also point out that central banks save the big banks and the financial system at this point in your view, and it might have been a temporary stay, right? we're still, we still have a lot of risk that could come in the next few years and gold answers your need for covering your strategy there, right? >> sure. well, i mean, i go back to one of the fundamental problems was

the overleveraging of the banks, which culminated in the failure of lehman brothers. and essentially the failure of many of companies. but they weren't allowed -- weren't forced to liquidate. lehman was the one time someone piece been forced to liquidate and we saw what nearly happened as a result of it. we've had many other companies that one way or another were either taken over, bailed out, fannie, freddie, aig, various banks, the spanish banks, greek banks, now we do it with governments. and i think all of those things suggest that the financial system is quite destabilized. and i agree with the fed that qe-3 is not likely to work. just as qe-1 and qe-2 didn't work. when we look back at where we were and where we are, we've had all this printing and deficit creation, and we really have accomplished nothing. in fact, we've gone into reverse in terms of job losses and numbers of homes sold in a year.

so i don't see the qe-3 as being substantive in terms of helping the economy. >> eric, it's neel kashkari. as a big gold investor, how do you think about the future of inflation? is the future 3% inflation? 4% inflation. with all of this money printing in the u.s. and in europe, there's a risk that's higher than that. do you have a view? >> sure. well, neel, thank you for the question, and i find it rather interesting. i read bill gross' articles and i can see going back to may that looked like bill was shifting his stance somewhat in that may article suggested that maybe real assets are a better investment and said he wasn't sure about stocks and bonds and tweeted maybe gold is a buy. and i think that inflation is likely to heat up. i mean, i think it's continually underreported for the average person in the 99%. i don't think they believe for one second that underinflation

is 2%. and i think that incomes aren't going up by that much, the whole 99% is under extreme pressure here. i think it creates more stress on governments in the banking system ultimately. and you want to have your assets in something that's real, that can benefit by the debasement of currencies as basically going on and all the developed world's central bank. >> larry? >> the real question is timing. when do you think this is all going to come apart? the end game has got to be that you can't print money to get yourself out of a problem. be you can print money for quite a while. so was this going to go on for one year, two year, six months, or ten years? >> well, it's a great question. and when you ask the question, when is it going to fall apart? i would have thought it would fallen apart years ago. it seems rather extreme to me that as investors we accept it

as a palliative to the situation, which it certainly is not. we can keep the markets, i think chairman bernanke basically measures himself by how he deals with the stock market and how he deals with the housing market. they have been kept up here by the hope that something's going to happen. but i think when you review the results of qe-1 and qe-2, post qe-1 and 2, you realize the market gets in a bit of a funk. we've come to grips with the fact that maybe it won't do anything. most of what's being done is to help the financial system and not necessarily the man on the street. >> we've talked about some dire stuff earlier. i guess there's a certain probability to some really frightening things happening within the next 10, 15 years, i guess. >> well, joe, i would say this, and things happening for quite a while here.

>> we're used to -- we're used to, you know, we don't worry about shelter that much anymore, food that much, safety that much. we have a society that we think can't go back to, you know, decades ago. and maybe sometimes, you know, we assume we can go to the supermarket and buy all the food we want. >> right. quite frankly, i don't often go there. you know it's a worry, and i'm more interested in the investment and what we do about it as investments. >> hopefully with the money you make, hopefully you're able to go buy something that has those things. this is a time and place for that, but with gold bugs, we've got to ask that question. i know you're ready if something does happen. right? >> well, i think you have to be prepared for reality. and, you know -- and when we see what's going on in the world. i mean, one can hardly argue that prudence is very much

warranted here. >> i made the mistake of watching the road with the -- and i'm petrified. i'm going to go take karate and carry around a gun and $2,000 worth of gold everywhere i go. eric, thank you. appreciate it. >> all the best. thank you. >> well, we'll try. let me know where you live. i need to come there. when we come back, more from our guest hosts, and by the way, don't miss "squawk box" tomorrow, another huge lineup including larry summers. former economic adviser, david cody, and staples co-founder thomas stemberg. at optionsxpress we're all about options trading.

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welcome back, everybody. let's get to our guest hosts again, larry lindsey and neel kashkari. and we talked about how both of you have given service to the country through the times you've been there in the past. we have talked about ben bernanke an awful lot since qe-3, and larry, you think there's a bigger message there. >> i do. and we were somewhat critical of the decision. but i don't think anyone should be critical of ben bernanke's performance. i can't think of anybody who has physically done more for the country. i mean, those were 18, 20,

21-hour days. the guy has made a tremendous sacrifice on his family, on himself personally, and i do think it's important that for the country to grow up about this, it's fine to disagree about the policy, but he takes personal attacks from both the right and left, and i think they're totally unjustified. and i think we should actually, you know, pay him a tribute. i think he's making a great sacrifice and we need to salute him and people like him. >> you know, i think i'd agree with that. >> i totally agree with that. i give president bush credit for appointing chairman bernanke, and i give president obama tremendous credit for reappointing him. again, just like larry said, people can agree or disagree, you know, chairman bernanke is doing unprecedented creative policy. he's not somebody who is saying, well, the world is bad and it's out of my hands, he's saying i'm going to do everything i can to try to help the american people. some of it may work, some of it may not work, and i think we owe him a big debt of gratitude. >> when i said earlier, it was a

throw away comment to you, lindsey. i said something like in the next four years -- i implied that maybe the president's going to be reelected and you said to me, wow, you've been saying that for a while, i guess, right? and you're implying i'm coming around to that idea. i don't know what's going to happen, the final poll is on november 6th. i don't think anyone knows at this point. >> right. this is -- >> but you don't think it was the candidate, you think it's a safe pick. >> history suggests parties can make a safe pick or a risky pick. if you look at history, whenever the opposition party's tried to unseat an incumbent with the safe pick, they've lost. >> bill clinton was not a safe pick. >> compared to -- >> he was not a safe pick. i'm saying you're right. he's a prime example of what you're talking about. >> bob dole was, john kerry was. >> right. >> and bill was swinging for the fences. he's just a dangerous dude. i like him now, but he is not a

safe -- you never know what -- >> he's not safe. >> he's still not safe. >> you're absolutely right. but again, look at the safety guys. and they run a respectable race. but they rarely win. >> you're still a republican even though you have -- yes, where's your mike? oh, you got it, good. even though you have -- you're in business now and have a lot of clients on both sides of the aisle. and i understand that. i would assume with what you view, you're going to be disappointed in the way the government is run over the next four years. country's resilient. everything going to be okay for the next four years? >> well, i think that we need more seriousness in washington. i think we're much too bumper sticker oriented. i think there's way too much political posturing going on. >> can the president triangulate to your satisfaction and work with the other side? >> i think the president can do anything. >> really? >> i don't believe he will.

i don't see any evidence that he's done it so far. >> he's transformative in his own mind. hep wants to transform things. is that your view of what's happening here? >> i think he had a great opportunity to strike a deal with chairman -- speaker boehner. >> yeah. >> he was talked out of it by his colleagues. i think he could've embraced the commission. >> that shows there's hope, then, if he wanted to go that way and was talked out of it. at least his heart was in the right place. at least for part of those discussions. >> what i'm concerned with here is the role of leadership. if you have a president who is talked out of something he believes in by the senate majority leader and the speaker of the house. >> the former speaker of the house, then i don't think -- and i also think that one of the problems that the administration has is that they never proposed the original stimulus bill. it was written in congress. they never proposed an obama care bill, it was written in congress.

dodd/frank was written in congress. i think the administration, the role of the executive is to send down a piece of legislation that is an anchor that doesn't let things go too far one way or the other. and i think their mistake in their first two years when they had overwhelming majorities was the administration never laid down an anchor. >> do you think they've learned from those mistakes? >> never in history has a second term been better than a first term. and i think that's important to keep in mind. >> whoa, whoa. clinton. >> well, president clinton's, remember the budget deal was signed in the first term. but the second term was dominated by impeachment. >> the tabloids would say the second term was much better. i'm sorry. you get into the stock picks when we come back, we're going to do that. we're going to have to go right to you. you ready? you got them? >> i'm ready.

>> what do you got? one stock pick, two? >> lots of stocks all around the world. >> coming up, we're going to tell you what you should be watching this weekend, the ryder cup is on nbc. ready or you're watching "squawk box" on cnbc.

welcome back to "squawk box." in golf news, the u.s. won the junior ryder cup for the third straight time. meantime, the professionals are ready to begin play. tiger, brandt snedeker, bubba watson, others hitting the course at medina country club in illinois for a practice round yesterday. nine of the top ten in the world are competing. the three-day tournament tees off -- it starts this friday when all the players will tee all. nbc is the place to go. starts saturday at 9:00 a.m. eastern and continued on sunday starting at noon and it's gotten to the point where people love the master, people love the u.s. open, but recent ryder cups have made this maybe the greatest spectacle in golf to watch.

and these euro guys, they play over here where all the money is on our tour. the other tours aren't as good. and when they get together, though, to try to beat -- they really want to beat us americans. i don't know why. because we think we're good here. it's tiger, it's phil. but a lot of times, our guys seem to buckle a little and their guys seem to hit every putt they look at and it's so much fun to look at. but then these euros start with this horrible -- and you hear it rumbling through the course. it's horrible. but it's great to watch. you watch this? >> i don't. >> you guys are losers. all right. when we come back, we'll have more from our guest host larry lindsey. tomorrow, a "squawk box" fiscal summit. one hour with former council and economic advisers chairman martin feldstein, david coady,

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we have two guest hoersts. neel, are they global again today? >> yeah, we have a wide range of stocks. today we're liking companies that have very strong balance sheets, attractive valuation today, strong cash flow generator and a market leadership position. and even though our joe toroutl moderate, we can go through some names if you like. just take samsung. global mobile, smart phone provider. samsung's stock got hit with the apple lawsuit. doesn't apply to the galaxy s3. buy samsung today. we think it's a good long-term holding. >> even though most people think apple. >> but take intel. ten times earnings because people are nervous about pc shipments. intel has a data center business. it's got a 25% return on equity.

or go overseas to europe. the eurozone stocks have been hit by the european crisis. vote-a-phone owns 45%. or take kia motors, the large auto company in korea. kia is taking share away from global competitors. even though the eurozone is under real pressure, kia has increased its sales 25% in europe last year by taking market share away there. are good companies generating strong cash flow, strong balance sheets that are taking market share. >> to me it just sounds like you're talking about comcast. don't you wish you recommended that at 19 or 20? >> we're not that worried about the ones that we missed. >> have you watched? >> yes, i have. >> great management. >> great nt